Accumuli Share Discussion Threads

[gargleblaster] 02/1/2015 16:15

Bull points
• Strong sales and profit growth
• Forecast yield of 3.5 per cent
• Lucrative cybersecurity exposure
• Shares are cheaply rated
Bear points
• Significant acquisition costs
• Risky middleman role
Accumuli (ACM) offers investors exposure to a hot part of the IT services market through lowly-rated shares that are forecast to provide holders with an attractive yield. And if EPS growth meets analysts' predictions in coming years, the shares offer the added potential of a re-rating.
Accumuli, which is also a favourite of IC columnist Simon Thompson, provides exposure to the $34bn (£21.7bn) global cybersecurity market and the rising threat of data theft and online fraud - security breaches rose by about two-thirds last year and exposed 552m identities. Government legislation could be another growth catalyst, as Parliament plans to obligate internet service providers to maintain records of internet address usage - a task suited to Accumuli's DDAM software.



Accumuli offers its clients the option of outsourcing their network security. It also provides cybersecurity consultancy services and resells software. A key feature of the company's growth to date has been its 'buy and build' strategy, which involves snapping up multiple software companies. In such a fast-moving area, Accumuli's strategy holds some real promise, and its purchase of IT security group Signify and 'big data' analytics specialist Eqalis last year helped to widen its gross profit margin from 53 per cent to 60 per cent while expanding its customer base from 300 to more than 700. And analysts expect December's £8.9m acquisition of IT risk group RandomStorm to contribute £1m in annual cash profits.
Accumuli has also been ramping up capacity to meet rocketing demand. It recently upgraded its 24-hour operations centre and expanded its professional services team. It is also selling additional services to existing customers - the proportion taking multiple products rose from 15 per cent to more than a fifth in the six months to end-September 2014. Furthermore, it has developed proprietary technology that helps different IT products to communicate, reducing the risk of it falling into the role of an expendable middleman. The multi-pronged strategy has helped it land several contracts worth around £1.5m in gross profit since the end of the first half.
Investors can take some comfort from the fact that 64 per cent of gross profits are recurring, which has helped provide a solid foundation for growth - first-half sales rose more than a third, and broker FinnCap expects full-year cash profits to rise 31 per cent to £3.8m. Yet Accumuli's shares trade at 12 times forecast underlying EPS of 2.1p for the year to end-March 2016, and offer a tasty prospective yield of 3.5 per cent. That looks excellent value compared with its peers in cybersecurity and IT managed services.
True, Accumuli's insatiable appetite for acquisitions does present a risk - it has hoovered up nine companies in the past four years - and amortisation and depreciation charges eclipsed underlying profits in the first half. But the deals have created cross-selling and cost-saving opportunities - Accumuli unearthed £0.6m in annualised savings through restructuring last year. Nor should investors worry about a fall in first-half sales of technology solutions, which stemmed from large projects slipping into the second half of the year. If Accumuli fulfilled all its orders in the period, like-for-like divisional gross profit would have risen more than 30 per cent.

[eddyeagle1979] 02/1/2015 15:43

Breaking out of its range since April - looking good!

[thepopeofchillitown] 02/1/2015 15:30

Could hit 30p today

[cheshire man] 02/1/2015 13:33

Thanks for that apad :-)

[apad] 02/1/2015 13:31

IC tip.
apad

[red army] 02/1/2015 13:30

This is looking positive if holding at 29p

[rivaldo] 02/1/2015 08:41

Yep, and new highs too.

Finncap's new target price is 36p, so still plenty of upside.

[thepopeofchillitown] 02/1/2015 08:19

Cracking start to the new year. Current price is a 3 year high. Let's hope we continue up to 35p

[rivaldo] 29/12/2014 13:46

100,000 just bought at 29p, above the published 28.75p offer price.

[igoe104] 29/12/2014 13:09

ACM have certainly got a great future, its certainly looking like it could be heading over 30p now, where it should be.

[mazarin] 29/12/2014 10:20

'Ere we go' - today's first tick up. Hopefully this is just the start of 'The Shape of Things to Come'...for the New Year and the coming 'War of the Cyber Worlds'
Edit. - and then there's a second tick up, the moment I typed this post....!

[rivaldo] 28/12/2014 23:30

Cheers APAD, good info re RandomStorm.

Lots of upside here imho given the now increased forecast of 2.1p-2.2p EPS for the year starting 1/4/15.

For non-Times subscribers, the article from Luke Johnson above isn't a direct tip for ACM, but does say as follows:

"Serial entrepreneur Luke Johnson made his first fortune selling Pizza Express. If he was starting in business today he would do things differently. Johnson studied medicine at Oxford and wanted to be a doctor until he found the lure of business, initially through running clubs for students, 'more exciting'.

He switched his attention to starting his own business, and says: 'If I were 18, well, like the guy said in that brilliant film The Graduate 'I just want to say one word to you. Just one word. Plastics.' The word I would say to an 18-year-old is 'cyber-security'.'

Sony, of course, initially pulled the film The Interview about North Korean dictator Kim Jong-un following a cyber-attack, and Johnson, a former non-executive director of Metro Bank, says: 'The single most guaranteed area for growth, it would seem to me, in the coming years is cyber-security.

'I served on the board of a bank until recently. You see it from the inside that banks are under assault permanently – thousands of times an hour. What's happened with Sony films is an example of how vulnerable even very sophisticated organisations are, and how dangerous some of these elements are out there, these hackers, and of how dependent we all are on our IT systems.

'We are all going to have to invest a lot more in cyber-security. Everyone from Government to business to individuals, we’re going to have to get better about firewalls, our password security. Even my own businesses probably aren’t investing enough.'"

[mazarin] 28/12/2014 18:19

As expected, to see over 6 days later, a rather 'not surprising' article in today's Financial Press concerning a 'Share tip for 2015' from Luke Johnson, if you're curious see :

[apad] 26/12/2014 10:04

Maybe not High Risk, B, but there is a risk associated with acquisitive firms. Difficult to value too (especially with the Tintins parroting). JDG fell from being a market darling recently, but HLMA have run that model "on a don't call us, we'll call you" basis for ever, to great effect.
They're also in a market sweet spot, with loads of companies doing stress tests - including using companies to send someone to the office with a hard disk :-)
apad

[hastings] 26/12/2014 09:15

Nice to know APAD, always good to get feedback from those using services.
For what it is worth, I walked past Signify last week, car park was full and looked pretty active inside, both usually positive signs.

ACM could enjoy a decent year ahead, particularly as the area it serves is both constant and growing.

[apad] 26/12/2014 09:04

Chatting to a Wealth Manager, IT director, in the pub (very experienced and grounded chap).
Uses and impressed by RandomStorm.
apad

[rivaldo] 24/12/2014 12:23

Useful article from t1ps.com which I'll copy as it's a few days old now - implies 2.1p EPS now the year starting 1st April:



"Accumuli - Acquisition
5 Days ago (2014-12-19 13:45:29)
Print this Article by James Faulkner

Cyber security specialist Accumuli (ACM) has announced the acquisition of of RandomStorm Limited for net cash consideration of £8.9 million, to be funded from Accumuli's own cash resources and through securing a £10 million debt facility with the group's bank (50% on a 5 year term loan and 50% on a revolving credit facility). RandomStorm is a UK based integrated information security specialist. It uses its own intellectual property and services to turn security data into security intelligence in addition to helping to simplify and automate regulatory compliance processes in order to provide peace of mind for network managers that their IT environment is fully protected. Notably, the vendors - who will stay on for one year in a consultancy capacity - founded previous Accumuli acquisitions Boxing Orange and Webscreen, which would indicate that management presumably has a good working relationship with them.

RandomStorm's unaudited results for the year ended 30th April 2014 showed revenues of £3.5 million, EBITDA of £1 million, gross assets of £2 million and net assets of £7 million. In the five months to 30th September 2014 (unaudited) RandomStorm generated revenues of £1.8 million and EBITDA of £0.4 million, which was after continued investment in sales and technical resources. Approximately 65% of revenues originate from consulting activities and the remainder relate to managed services linked to RandomStorm's own proprietary products. The nature of the services that RandomStorm sells means that gross profit margin exceeds 95% (as own consultant costs are treated as overheads) and historically there has been a substantial element (70%) of repeat purchases.

Acquisition rationale...

The increasing compliance requirements for companies, particularly around areas such as PCI DSS, continue to provide strong external growth factors and RandomStorm looks well placed to benefit from this expansion in the market. Additionally, Accumuli has been looking to acquire a business with an established presence in what can best be described as the "Prepare" phase of IT Security 'Readiness'. There are a number of recognised governmental frameworks in the US and UK which seek to establish a formal, staged approach to IT Security Readiness and these broadly break down into four areas: Prepare, Protect , Monitor and Respond. Accumuli's business to date has been strong on Protect and Monitor but less well developed in the Prepare area, and the Acquisition provides a strong entry point into this important area.

ASSESSMENT

RandomStorm appears to be a good fit with the existing Accumuli business in our view, bringing high-margin proprietary technology and beefing up the firm's capabilities in risk identification. The investment case continues to be driven by the growing market for cyber crime defence, with researchers at Gartner reporting that the worldwide IT security market is worth over $62 billion per year, with the UK valued at $3.6 billion. Within this market particular growth areas include managed & hosted IT security services, big data platform & performance analytics and core network services & network control, all of which Accumuli is well placed to take advantage of in our view.

Valuation...

House broker finnCap has increased its FY16 pre-tax profit forecast by 14% to £4.3 million on the back of this acquisition, bringing its EPS estimate to 2.1p. It has also introduced a new 36p price target (up from 33p) based on 10x FY16 EV/Trading EBITDA. At the current 25.25p Accumuli is now capitalised at £38.6 million. The house broker's current forecasts imply a current P/E multiple of c.14.9x falling to 12x for FY16, which looks reasonable value in light of the strong growth outlook. There is also the attraction of a 2.8% prospective dividend yield, delivered despite the company being in growth mode. We also note that Accumuli is one of the few companies on AIM to state an explicit dividend payout ratio, which is aimed at distributing up to 30% of pre-tax group EBITDA via a dividend.

We see key risks as being those associated with the firm's acquisitive strategy, competition for acquisitions bidding up prices and the firm's ability to meet market forecasts. "Strong hold". "

[buffetteer] 24/12/2014 12:08

check Acc major shareholders

[mazarin] 24/12/2014 11:53

Thanks Imran - I had checked Downing's website but found no reference to ACM, are you saying they have an interest in ACM? Cheers

[imranawan] 24/12/2014 11:04

Downing Investments are a 'boutique' fund who specialise investing in small caps and recently presented at MELLO in Derby. The female being referred to is Judith McKenzie, who manages one of their funds, and one of the strategies private investors use, is that they follow the 'smart money' which is specialist funds. They have better access to senior mgt than us private investors and most of the time undertake better due diligence.

[mazarin] 24/12/2014 10:24

B - what's the relevance of Downing Investments to ACM and the female referred to?

[buffetteer] 24/12/2014 09:26

A
Downing are an excellent small cap fund manager with a great record. Check them out. The energy of following them is that they have already performed much. Ore due diligence on an investment than I'm ever likely to . V impressed when I heard her speak recently.think you will find Acc at starting to sell their own software and I suspect will grow .also can't think that price is going to be a major factor when trying to secure your company's safety .i always like that.

[rivaldo] 24/12/2014 08:03

Nice 50k buy at 27p before the open today...

[apad] 23/12/2014 10:25

Thanks B, I had mean't to check on management shareholding and forgot - important as it's in their interests to grow the company using shareholders money.
Accept you plus side, who's Downing?
TRCS is now my biggest holding, but the clincher for me was that they had the hardware that generated the data, that sold the software, …
apad